MoneyTap to help banks give away Rs 300 crore in small personal loans

Rather than acting as marketplace for banks, firm controls experience of borrowing from end to end

When Suguresh Desai, an area manager in a TVS Group company, wanted to purchase a new car, he was short on cash to make the down-payment. Instead of renegotiating his loan with the bank, he simply made a Rs 1 lakh withdrawal through MoneyTap and paid.
 
Desai, who found MoneyTap through an advertisement on Facebook, said he was very impressed by the service — it cleared him a line of credit in two hours. “My experience has been excellent. If I had gone through any other service, it would have taken eight to 10 days for approval,” he says.
 
MoneyTap is a service which helps customers open a line of credit up to Rs 5 lakh with a bank in a few hours. Rather than acting as a marketplace for banks, the firm controls the experience of borrowing from end to end. From the initial Know Your Customer (KYC) check to the money being transferred to the borrower’s bank account, a customer can do it all from within the MoneyTap app.
 
The beginning
 
Kunal Verma, Anuj Kacker and Bala Parthasarathy founded MoneyTap in October 2015. They’d spent nearly a year working in the dark, building the product and integrating it with banking systems. Rather than lending from their own books, the firm thought utilising capital from banks would allow them to grow much larger, even if it took a little longer.
 

MoneyTap

Neither of the three had any background in the finance sector. Parthasarathy was earlier a partner at Prime Venture Partners, one of India’s premier financial technology investors. His knowledge of working with start-ups dealing with financial institutions, along with Verma and Kacker’s experience of building a company, prompted Prime to incubate the firm.
 
“We spoke to 1,000 consumers when we built this app, asking them what they wanted. The truth is they want something simple — no one wants to go to a bank, no one wants to fill forms, and getting rejected publicly is somewhat humiliating,” said Parthasarathy.
 
Taking this as the basis of their service, the company built the front-end which customers would see and use, a back-end that would integrate with banks, and the most important middle layer, of algorithms that would help separate good borrowers from the bad. The firm launched its app for consumers in September 2015; by next June, it had raised $9 million as part of a Series-A funding round, led by Sequoia Capital.
 
The opportunity
 
Shripati Acharya, partner at Prime Venture Partners which has backed MoneyTap, says the opportunity for lending to individuals is worth “a billion dollars”. While he admits the phrase is a chiche, he notes that several banks in India have revenue in tens of billions of dollars and profits of over a billion dollars.
 
“More, with MoneyTap, there’s some market creation happening as well; there are now people being lent to for the first time. Of course, risk comes with that but that’s a risk we do take,” adds Acharya.
 
MoneyTap disburses loans anywhere between Rs 3,000 and Rs 5 lakh. A space banks have stayed out of because of their huge overheads in processing of loans. By digitising the entire process end-to-end, MoneyTap says it’s able to retain a much higher percentage of the earnings on the interest.
 
With small loans now becoming financially viable, banks have shown interest to partner with MoneyTap, for the simple reason that it opens a new revenue stream for them. Further, the company has a revenue sharing agreement with the lender, incentivising it to find the right type of customers, who will keep coming back and not default on their payments.
 
Way forward
 
MoneyTap aims to issue Rs 300 crore worth of loans through its platform by the end of March 2018. A feat it says it will be able to achieve by partnering with at least six banks and non-bank finance companies (NBFCs), and expanding its service to customers across 50 cities.
 
Parthasarathy says the Rs 300-crore figure is more than marketing bait. After hitting that scale, he expects the company will be able to make money from each of the transactions it processes. As for overall profitability, he says the business if far too young to project a timeline but assures that MoneyTap has been working to build healthy financials since day one.
 

Expert Take: Demand for credit in Indian market is huge
 

Mihir Joshi, CEO, GVFL

MoneyTap can do well, provided they have the right kind of technology platform and a system of checks and balances, which needs to be configured properly. The model of partnering with banks is an intelligent one. Financial institutions such as banks and NBFCs are interested in services that will filter borrowers for them. For borrowers, the advantage is that if there are a number of lenders, their profiles will meet the criteria of at least one of them, if not many.
 
Traditionally, banks have stayed away from giving loans where they don’t know the end use of the money. Here is where start-ups can come in, using algorithms along with the right inputs to filter out the right profiles. I have come across companies which have the ability to scrape information from social media of a prospective borrower, to decide if they’re a good investment. It’s important that their data analytics engines are robust enough. That said, the demand for credit in the Indian market is huge.